Most smart card systems employ a stored value concept. This means that the smart card has the electronic value stored in its internal memory. These smart cards can be purchased with electronic cash pre-loaded. Electronic cash value can be added to these smart cards at kiosks by the cardholder via credit cards, debit cards, cash, etc. These kiosks are generally referred to as add value stations. The disadvantages to these systems are that they require convenient and multiple add value stations available to the cardholder in order to gain acceptance. Moreover, there is added cost to the system owner to purchase, install and maintain these stations, as well as the credit, debit and cash handling costs. The reloading of these smart cards is left at the discretion of the cardholder, that is to say that if the initial value of the purchased smart card is used up and the cardholder cannot access an add value station, the smart card system will simply deny access to the system unless there is the sufficient electronic value stored on the smart card.
In the event that a non-anonymous, stored-value smart card is lost or stolen, the cardholder must report the smart card to a customer service center and a replacement card is sent to the cardholder. A disadvantage to this model is that once a smart card is reported lost or stolen, the smart card is permanently inactivated even if the smart card is subsequently found since the value of the lost/stolen card has been duplicated on the replacement card. In anonymous stored-value smart cards, there is nothing that can be done to reimburse the cardholder for the lost value on the lost/stolen smart card since there is no link between the smart card and the cardholder. In non-stored value smart card systems, where the smart card is linked to a cardholder's bank account to make automatic deductions, there are numerous business scenarios where a card may be deemed temporarily ineligible to participate in the system. In these systems, permanently disabling the smart card would greatly inconvenience the cardholder and represent a significant cost to the system operators/owners.
Thus, there exists a need for regulating smart card usage in smart card systems without burdening the cardholder with constant monitoring and replenishing the value on the card and without having the system owners bear unnecessary costs.